Battle of the $100 Billion Deals: AMD & NVIDIA Both Pin Strategy Hopes on OpenAI
NVIDIA (Nasdaq: NVDA | NVDA Price Prediction) recently agreed to a partnership with OpenAI that could see the company invest up to $100 billion into the company in exchange for 10 gigawatts worth of chip purchases. Shortly after, AMD (Nasdaq: AMD) announced…
NVIDIA (Nasdaq: NVDA | NVDA Price Prediction) recently agreed to a partnership with OpenAI that could see the company invest up to $100 billion into the company in exchange for 10 gigawatts worth of chip purchases. Shortly after, AMD (Nasdaq: AMD) announced its own deal with OpenAI that could see the company sell 6 gigawatts worth of chips (valued at $90 billion to $100 billion) to the fast-growing ChatGPT creator.
Since AMD’s announcement on October 6th, its shares have rallied 42% while NVIDIA’s shares have fallen slightly. In addition, criticism has grown across the media that these deals represent a new form of circular ‘vendor financing’ that is a repeat of the Dot-Com bubble. In the segment below, taken from 24/7 Wall St’s AI Investor Podcast, analysts Eric Bleeker and Austin Smith break down the strategic differences between AMD and NVIDIA striking their deals with with OpenAI.
For NVIDIA, its important to look at the details of their OpenAI agreement. The company’s chips in the partnership are being used in OpenAI’s ‘self-build’ project. The partnership leads to more sales for NVIDIA, but it also provides them an unprecedented scale in working with a company building data centers at the same scale as leading hyperscalers like Microsoft and Amazon.
AMD’s deal with OpenAI is costly since it dilutes existing shareholders. OpenAI is provided with warrants to purchase up to around 10% of AMD’s shares as part of the deal. However, the deal gives AMD the equivalent of an ‘anchor tenant’ for its ambitions to be a complete system builder that can compete more effectively with NVIDIA’s leading systems like NVL 72. You can view our full discussion below for more details.
Watch Our Discussion On The Strategic Reasons Both NVIDIA and AMD Struck Major Deals with OpenAI
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Eric Bleeker, CFA has been investing for more than 20 years. He began his career working at Microsoft before joining Motley Fool, one of the largest publishers of financial research. In his 15 years at Motley Fool Eric served as the General Manager for Fool.com and led coverage in the Technology & Telecom sector. In addition, he was a featured columnist and has hosted dozens of investing seminars attended by more than a million total investors. Eric has more than 1,000 financial bylines to his name and has been featured in The Wall Street Journal, CNBC, Fox Business, and many other leading publications. He is currently focused on artificial intelligence investing and is a CFA Charterholoder.
